NBFC Compliance

Welcome to the comprehensive guide on demystifying Non-Banking Financial Company (NBFC) compliance. As the financial landscape evolves, NBFCS must navigate the intricate web of regulatory requirements to stay compliant and thrive in this competitive industry. 

In this guide, we will break down the complex compliance processes, providing a clear understanding of the regulations, their implications, and the steps you need to take to ensure compliance. From registration and licensing to maintaining capital adequacy ratios, reporting obligations, and conducting audits, we will explore every aspect of RBI compliance for NBFC. 

We aim to empower you with the knowledge and tools to navigate the regulatory landscape confidently.

Whether you are an established NBFC looking to brush up on your compliance knowledge or a new entrant seeking guidance, this guide is your go-to resource for demystifying NBFC compliance. So let's dive in and unlock the secrets to a successful and compliant NBFC operation.

What is the need for NBFC Compliance?

Non-Banking Financial Companies (NBFCs) have been an integral part of the Indian financial system, providing an alternative source of credit to individuals and businesses. However, with the increasing number of NBFCs, there has been a growing concern about their compliance with regulatory requirements. NBFCS must comply with the regulations to ensure a secure financial environment. RBI compliance for NBFC

• Protect Your Reputation

Non-compliance can also damage your reputation in the market. Customers and investors are more likely to trust a company that follows the rules and regulations set by the RBI. Compliance can help you build a positive reputation and gain the trust of your customers and investors.

• Ensure Business Continuity

Compliance with RBI regulations can ensure the continuity of your business. Non-compliance can result in the revocation of your license, which can lead to the closure of your business. Compliance can help you avoid such situations and ensure the continuity of your business.

• Scope of Work

Under this, the post-registration compliance for NBFC is supervised and executed by us. Precisely the registration of other external agencies and a month on monthly reporting is taken care of by us. Initially, the institution must get registered with a credit information company (CIC), Financial Intelligence Unit, Information Utility, Central KYC, and CERSAI as per its nature of activities. In India, NBFC is a Reporting Entity, as per RBI terminology, a financial institution licensed by RBI. There are 4 CIC companies which is a membership-based model; first, take membership and regularly report business activities by the 15th month of the following month.

As such, any post-registration compliance is required, do remember us for a hassle-free solution from us. We provide one-time registration and regular reporting of business activities of NBFC in regular frequency as per the applicable timeline given by the Reserve Bank of India.

NBFC compliance refers to the rules and regulations proposed by the Reserve Bank of India. These regulations are in place to ensure the stability and smooth functioning of the financial system to safeguard the interests of the individuals. It plays a significant role in the Indian financial system providing services to businesses and individuals devoid of traditional banking channels. Nevertheless, NBFC comes with a storehouse of guidelines & regulations that mainly centre around capital adequacy, provisioning, and asset classification. 

However, Non-compliance with RBI regulations can result in hefty fines and penalties. These fines can be substantial and severely impact your business's financial health. By complying with the regulations, you can avoid these penalties and ensure the financial stability of your business. 

NBFCs primarily deal with sensitive financial information, giving credit to the users. To cater to this, one must fulfil the regulations, ensuring customer data is safeguarded from fraud or misuse. Besides, NBFC compliance bridges trust with the stakeholders, like investors, regulators or customers. And demonstrates that the NBFC is committed to ethical and transparent business practices and is willing to take responsibility for its actions.

Even RBI compliance for NBFC states RBI compliance helps to maintain the stability of the financial system. NBFCs are required to maintain a certain level of capital adequacy, which helps to ensure that they have sufficient funds to meet their obligations. This is important for preventing systemic risks that could destabilize the financial system.

Essential Requirement of NBFC Compliance

Being a Non-Banking financial institution, adhering to compliance is not necessary but a serious necessity. With RBI (Reserve Bank of India), you can ensure your business adheres to the proposed legislation. Failing to do so would generate penalties, like revoking the license. However, to help you avoid these challenges, let us look at the essential NBFC compliance checklist dictating the process-

• Registration & Licensing

The first step for compliance is to ensure you are registered with the Reserve Bank of India. For that, you require a certificate of Registration (CoR) as mentioned by the apex institution (RBI). The process under NBFC compliance claims to maintain reports, fulfilling prudential norms & maintaining a Minimum net owned fund (NOF).

• Data protection

Data Protection is embedded as a key component in NBFC Compliance. It ensures that the customer data is fully protected & secured. With this, it mentions a law that centres around the Personal Data Protection Bill of 2019 that specifies the incorporated security measures to avoid data mishandling or breaches. 

• Capital Adequacy

Capital Adequacy in NBFC compliance acts as a surety given by the business to withstand any financial shocks/ losses or as much as 15%. This is the minimum ratio governed by the rule. Failure in doing so can have repercussions such as revoking of license. 

• KYC & AML

Know your customer and anti-money laundering constitutes a part of the NBFC compliance. Within this, you need to identify the customers, look for proper records and report in case of any suspicious activity. Failure to do so can result in severe penalties.

In conclusion, compliance is not an option but a must-have for NBFCs. By following this essential NBFC compliance checklist, you can ensure that your business complies with all the regulations and avoid the risks associated with non-compliance. Don't risk your business by ignoring these critical compliance requirements.

It is noted that Non-banking financial institutions play a detrimental role in the financial systems. They offer services in the form of investments, loans, and insurance to individuals as well as businesses. NBFC Compliance is dictated by various activities and liabilities, which include-

The Compliance Checklist for NBFCs for Non-Deposit and Deposit companies are categorised accordingly. 

As a non-banking financial institution, it is crucial to comply with the regulations fixed by the Reserve Bank of India (RBI). 

The registration process under NBFC regulation involves applying to the RBI, along with all the necessary documents and fees. The RBI then reviews the application and grants registration if all requirements are met.

Proper registration is crucial for several reasons. Firstly, it ensures that the NBFC operates legally and within the guidelines set forth by the RBI. This protects the company from any legal or financial consequences arising from non-compliance. The points mentioned below are as follows- 

• Acquire DSC and DIN for the Directors
• Apply Name-approval
• An affidavit from Directors to meet RBI provisions
• Draft MOA & AOA
• Filing incorporation forms with necessary documents
• Obtain a Certificate of Registration from the RoC (Registrar of Companies)
• Drafting of application for registration
• Apply for registration
• The applicant has to file an online application with the RBI
• On successful submission, a CARN (reference number) will be generated to facilitate future inquiry.
• Now send the hard copies of all the submitted documents and the application to the Central office of RBI.
• The head office shall check the accuracy of the documents.
• The head office of RBI grants NBFC License only if the company is fulfilling the requirements u/s 45-IA.
• The company must commence its NBFC business within six months from the date of the Certificate of Registration (CoR)

• NBS-7: highlight the quarterly statement of capital funds, risk assets ratio, etc. 
• NBS-2: Monthly returns on the company's key financial metrics.
• ALM Returns: NBS-ALM-1 format monthly short-term dynamic liquidity statement. 6-monthly structural liquidity statement in NBS-ALM-2 format. And yet another NBS-ALM-3 style 6-monthly declaration of interest rate sensitivity.
• Branch info return: Return on key financial metrics for ND-NBFCs with assets over Rs. 50 crore but under Rs. 100 crore, reported quarterly. Basic details include the company's name, address, NOF, and profit or loss during the last three years.

Types of Returns by Deposit Taking NBFC

When it comes to investing, there are various types of returns that you can earn on your investment. However, not all returns are created equal. Returns by deposit are the best investment option for several reasons. 

• NBS-1: It mentions the quarterly returns mentioned as per the first schedule.
• NBS-2: It talks about the returns on the prudential norms.
• NBS-3: It mentions the quarterly returns on liquid assets.
• NBS-4: It highlights the annual returns based on mentioned criteria submitted by a rejected company, appropriating deposits from the public. 
• NBS-6: Monthly returns on capital market exposure for deposit-accepting NBFCs with assets of at least Rs. 100 crore.
• ALM Returns: Half-yearly NBFC holding public deposits worth over 20 crores rupees or assets at over 100 Crores.
• Auditor's Balance Sheet
• Branch info return

Post-Incorporation Compliances under NBFC Regulation

Post-incorporation compliances are crucial to ensure that your NBFC operates smoothly and avoids any legal complications.

Here are some of the post-incorporation compliances that your NBFC must adhere to:

• Registration to become a member of all CICs
• Registration under CERSAI or Central Registry of Securitisation Asset Reconstruction and Security Interest
• FIU-IND Registration
• Central KYC Registration
• Adoption of Fair Practice Code
• Submission of Financial Information to Information Utilities
• Adoption of Anti Money Laundering Policy & IT Policy
• Filing of timely return with RBI
• Convene Statutory Meetings
• Maintenance of Accounts
• Income Tax Return Filing
• GST Return Filing
• MCA Compliance

At Corpseed, we understand the importance of acquiring NBFC compliance. It is a crucial step towards expanding your business and reaching new heights of success. Our team of experts has years of experience and Extensive knowledge of the procedures involved in obtaining NBFC. We are well-versed in the legalities and regulations of the process, ensuring that your registration is completed seamlessly and efficiently. With our expertise, you can rest assured that your registration process will be handled with the utmost care and professionalism. So, if you are looking for a reliable and experienced team to handle your NBFC Compliance, look only as far as Corpseed.